Limitation of Design Liability

In a recent arbitration, almost 12 years after completion of
a new-build, low-rise block containing flats, shops and communal facilities, a
developer claimed against his builder for water damage. The developer
particularised the claim in terms of design defects with a few sweep-up
allegations of poor workmanship. The remedial scheme commissioned by the developer
involved a redesign of that part of the building alleged to be at fault. The
developer sought compensation from the builder for the full cost of the
remedial works.

The builder confidently rejected liability for the cost of
correcting design flaws as the design was produced by the developer’s chosen
architect whose design the builder had been obliged to accept.

While the builder correctly understood how the design work
had been undertaken, insufficient attention had been paid to the peculiar split
between design liability and design duty under the building contract. The
builder had entered a modified JCT design and build contract. This made the
builder liable for negligent design while requiring the builder: to engage the
developer’s architect, to implement the architect’s design and not to alter the
architect’s design. Thus the builder had liability for a design over which he
had no control.

Statute of Limitations

The design, as evidenced by the drawings, was completed more
that 12 years before the action was brought. Practical completion was less than
12 years before the action was commenced. The developer held that, as a
builder’s duty continued until practical completion, the action was not statute
barred. The builder disagreed, holding that if the action was statute barred
against the architect, insofar as the claim was for deficiencies in the
architect’s design, it must also be statute barred against the builder. The
developer also argued that there was an implied continuing duty to review the
design during inspections. However the building contract did not include a
requirement for, and the architect was not engaged to carry out, routine
periodic architectural inspections during the works.

Flawed Design

From the outset, reports by the project insurer’s surveyor,
the occupant’s surveyor and the developer’s surveyor informed the legal
proceedings and formed the basis for the remedial work. It was while the case was approaching a hearing and after
the remedial work was complete that ArchiFACT was invited to prepare expert evidence
and still later that the developer obtained an expert report.

ArchiFACT reported that the design was flawed (but not as the
developer asserted) and that the developer’s remedial scheme was similarly flawed.
The developer’s expert advised revising the developer’s case and the builder,
on receipt of the developer’s expert’s report, stated that it raised issues
other than those pleaded and applied to have much of it struck out unless the
claim were revised. Such a late fundamental revision to the Statement of Case
may have exposed the developer to a claim for abortive costs and the developer
eschewed this advice and resisted the application. The arbitrator was minded to
allow the claimant’s expert evidence on the basis he could properly ignore any
part of it which did not go to the pleaded issues.

Settlement

Both parties, now close to a hearing, were in possession of
expert evidence which put into question the validity of the claim as pleaded
but which showed there was, subject to the Statute of Limitations, a viable
claim. The developer’s costs already exceeded the sum claimed and the
anticipated costs to go to a full hearing would make the parties’ costs greatly
exceed the sum in dispute. The result was a compromise settlement following the
experts’ meeting. Regrettably, due to the legal costs incurred, the settlement
left both parties out of pocket by more than the sum claimed. A high price to
pay for the experienced gained. An earlier reading of the contract documents
and appointment of experts could have brought the dispute to a cheaper, quicker
and more effective resolution.